The Levelized Cost of Energy (LCOE) of wind power is rapidly gaining equilibrium with other energy sources, making it one of the most attractive options for utilities and developers looking to increase the penetration of renewables in their portfolio. However, the LCOE of wind can vary widely from project to project, and developers must keep a sharp eye on those factors that influence project profitability.
The time is now for an assessment of the economic feasibility of an energy source that incorporates costs over the lifetime of the project. Major cost categories include capital, fuel, and maintenance. While being touted for low fuel costs, wind is essentially free, wind energy often requires significant capital expenses that raise its LCOE. Furthermore, the variability of wind energy can be hard on equipment, making it one of the more maintenance-intensive of the renewable sources. The good news is that advancements in technology as well as focused efforts to control carbon emissions during energy production have brought wind costs inline with other sources.
The chart, adapted from the US Energy Information Administration’s Annual Energy Outlook for 2013, compares the LCOE of new generation sources coming online in 2018. For a full understanding of the assumptions in this analysis, access the EIA report at http://www.eia.gov/forecasts/aeo/electricity_generation.cfm. Only natural gas offers a significant LCOE advantage over onshore wind development.
However, while natural gas has some unique advantages over other fuel sources and is likely to be a strong contender for the foreseeable future, it has drawbacks as well. Perhaps the biggest is that the fuel requires an extensive network of pipelines and refinement facilities to bring the energy from the ground to point of use. In comparison, wind is converted into useable energy at the turbine. With the appropriate connectivity and available grid capacity, even small wind farmers can “ship” their goods almost anywhere, using the vast array of power lines already available. Many energy experts don’t necessarily see the race to grid parity as a competition between sources of supply. According to Alfredo Parres,Head of ABB‘s Wind Sector Initiative, “Utilities should look at optimizing the energy mix. Given the current state of technology and the variable nature of many renewable sources, natural gas and wind are more partners than competitors.” Register for the paper and read the rest here:
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